Wall Street was up and the FTSE underperformed as US business activity reaccelerated in May to the fastest pace in two years. (zz/NDZ/STAR MAX/IPx, Associated Press)
Wall Street stocks pushed higher on Thursday as US business activity accelerated again in May to the fastest pace in two years. Both the manufacturing and services sectors surged amid increased orders and buoyed confidence.
The headline S&P Global Flash US PMI Composite Output Index rose sharply from 51.3 in April to 54.4 in May, its highest since April 2022.
It came as the FTSE 100 (^FTSE) and European stocks were mixed, with London's premier index underperforming as a UK general election is scheduled for 4 July, earlier than many expected.
The six-week campaign has begun immediately, with average polling data suggesting it is likely Labour will win and form a government, achieving power for the first time since 2010.
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It also came amid a wider sense of caution with mounting concerns over fresh trade tensions between the US and China.
London’s benchmark index was 0.3% down in afternoon trade with utilities taking a beating as National Grid (NG.L) announced a £7bn capital raise to help fund investment
Germany's DAX (^GDAXI) rose 0.1% and the CAC (^FCHI) in Paris headed 0.1% into the green
Victoria Scholar, head of investment at Interactive Investor, said: “Election fever takes centre stage in the UK amid a mixed market open across Europe. The DAX and the CAC have managed to eke out modest gains, while the FTSE 100 is hovering just below the flatline.
"The pound is trading flat against the US dollar, after hitting two-month highs yesterday amid expectations the Bank of England could take longer to cut interest rates after inflation data came in hotter than expected."
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LaToya Harding
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Well that's all from us today, join us again tomorrow when we'll be back for more. Thanks for following along.
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LaToya Harding
Morgan Stanley chairman steps down
James Gorman, the chairman of Morgan Stanley will step down from the helm at the end of the year.
He is set to exit after giving up the chief executive position to Ted Pick in January.
The Australia-born banker jumped from Merrill Lynch in 2006 to help rejuvenate Morgan Stanley’s wealth-management business and took over as boss in 2010 as it was grappling with the scars of the global financial crisis which began in 2008.
LaToya Harding
Vet prescription fees could be capped
03/07/16 Dog blood donation Alfreton, Derbyshire. These dogs may look like they’re getting dramatic live-saving treatment on the vet’s table but the (Rod Kirkpatrick)
The Competition and Markets Authority (CMA) is set to probe the vets market amid concerns that pet owners are overpaying for treatments.
The British Veterinary Association said regulation of the sector was "woefully out of date" as it welcomed the review.
The CMA is now launching a formal investigation, which means it could intervene directly in the market.
“The message from our vets work so far has been loud and clear – many pet owners and professionals have concerns that need further investigation," said Sarah Cardell, the CMA's chief executive.
“We’ve heard from people who are struggling to pay vet bills, potentially overpaying for medicines and don’t always know the best treatment options available to them."
LaToya Harding
US business activity defies slowdown expectations
Kyle Chapman, FX markets analyst at Ballinger Group, said:
The US economy is booming again. The reacceleration in growth suggests that spending remains robust and that inflationary pressures aren’t going anywhere any time soon.
Prices are now rising in the system more quickly and businesses are passing these through to consumers – this bolsters the need for the Fed to keep rates higher for longer.
The dollar has been under some downward pressure recently and part of this has been down to a convergence in transatlantic growth dynamics, but those hoping for an end to US economic exceptionalism will be bitterly disappointed.”
LaToya Harding
Wall Street climbs as US private sector grows
Stocks on Wall Street climbed higher on Thursday as US business activity reaccelerated in May to the fastest pace in two years. Both the manufacturing and services sectors surged amid increased orders and buoyed confidence.
The headline S&P Global Flash US PMI Composite Output Index rose sharply from 51.3 in April to 54.4 in May, its highest since April 2022.
Chris Williamson, chief business economist at S&P Global, said:
The data put the US economy back on course for another solid GDP gain in the second quarter.
Not only has output risen in response to renewed order book growth, but business confidence has lifted higher to signal brighter prospects for the year ahead.
However, companies remain cautious with respect to the economic outlook amid uncertainty over the future path of inflation and interest rates, and continue to cite worries over geopolitical instabilities and the presidential election.
LaToya Harding
Best UK mortgage deals of the week
Mortgage rates have risen this week, as future homeowners are still struggling to find a decent price and more are taking loans well into retirement.
The average rate on a two-year fixed deal this week stood at 5.89%, higher than the previous 5.69%, while rates for a five-year deal came in at 5.39%, also higher than last week's 5.24%, according to figures from Uswitch.
With fewer BoE interest-rate cuts now expected in 2024, several lenders have raised rates – adding pressure on homebuyers and those looking to remortgage.
"It's been a mixed bag for mortgage rate changes over the past week. Natwest increased rates on selected products last Wednesday, only for Barclays, Santander and TSB to announce decreases on selected products towards the end of the week," Kellie Steed, Uswitch's mortgage expert told Yahoo Finance UK.
LaToya Harding
US unemployment claims fall
The number of Americans filing new claims for unemployment benefits fell last week by 8,000 to 215,000, after the small spike three weeks ago.
This suggests the US jobs market remains strong, encouraging firms to hold onto workers.
The four-week average remained relatively stable at 219,000 - a rise of 1,750
LaToya Harding
What does the UK general election mean for your finances?
Prime minister Rishi Sunak’s suit has barely had time to dry after his rain-soaked announcement of a 4 July election and already we’re wondering what the election means for our finances.
We’re looking for clues as to what might be in the manifestos and what changes may come with a victory for either party. There are a number of key areas to watch.
Turkey’s central bank kept interest rates on hold at 50% today, for the second month in a row.
The bank’s monetary policy committee said it decided to keep the policy rate unchanged despite high inflation.
The central bank said on Thursday that its monetary policy stance would “be tightened in case a significant and persistent deterioration in inflation is foreseen.”
It came as inflation hit 69.8% in the year to April, up from 68.5% in March, according to official data published in early May.
LaToya Harding
Five reasons markets seem relaxed about general election
ING has said today that UK investors have become accustomed to political drama over the past few years.
Here are the reasons markets are so relaxed:
Labour is miles ahead in the polls
Unlike 2019, Brexit is no longer a major unknown
Scottish referendum remains unlikely'
Neither party is promising radical fiscal policy shifts
An election doesn’t shift the Bank of England outlook
ING said:
"That could be generated from pre-election policy pledges by Labour. Any news concerning plans on future relationships with the EU could also generate some GBP [the pound] noise. The most impactful news would probably be on a new Scottish referendum which, as we note above, looks unlikely.
"However, this would likely just be noise, and the direction will still be dictated by monetary policy in the UK and the US. As we don’t see the BoE changing its policy plans due to the election, the overall implications for sterling should be limited.
LaToya Harding
Wizz Air shares soar 7% higher
Wizz Air jumped as much as 7% on Thursday, reversing some of this year’s year-to-date losses, after it reported annual net profit of €365.9m, swinging from a loss of €535m year-on-year.
It also expects higher earnings this year with net income likely to come in between €500m and €600m.
The European low-cost airline has benefitted from ongoing strong customer spending particularly over the upcoming summer season.
Victoria Scholar, head of investment at Interactive investor said:
"Despite pressures from the cost-of-living crisis, individuals and families continue to prioritise their summer holiday spend, even if it comes at the expense of other discretionary spending such as on white goods or in restaurants and bars. That has helped the airline navigate pressures from the Middle East conflict and jet fuel price uncertainty.
"Last year the company was forced to cut its annual profit forecast in November because of potential problems relating to its Pratt & Whitney engines. The company described it as an ‘unprecedented operational challenge’.
"The challenge for Wizz Air and other low cost carriers is translating strong travel demand into an improved share price performance. Investors have been cautious towards the sector this year amid the geopolitical instability and ongoing cost of living pressures."
LaToya Harding
More than a fifth of homes gone within 30 days
File photo dated 04/12/14 of members of the public looking in the window of an estate agents in South Kensington, London. Average UK house prices have increased for the first time since June last year, according to the Office for National Statistics who found average house prices increased by 1.8% in the 12 months to March, signalling potential green shoots in the UK's property market. This lifted the average house price across the UK to £283,000, up from £281,000 in the previous month. Issue date: Wednesday May 22, 2024. (Daniel Leal-Olivas, PA Images)
The latest data release by estate agent comparison site, GetAgent.co.uk, has revealed that just 14% of properties currently listed for sale within the last 30 days have found a buyer.
Although this figure does climb to more than one in five across a number of major cities, estate agents are facing drastically different market conditions from one city to the next.
The figures showed:
Across England, just 14.3% of all homes currently listed within the last 30 days have snagged a buyer.
Across Sheffield, agents are selling as much as 22.9% of all homes listed within 30 days of them hitting the market.
In Bristol, 22.6% of homes are finding a buyer within just 30 days, while in Newcastle (22.5%) and Leeds (20.4%) more than one in five homes are also selling within 30 days of first being listed.
In contrast, Leicester is home to the lowest level of homes selling at pace, with just 9.8% of all current for sale stock finding a buyer within 30 days.
London also ranks poorly in this respect (11.6%), as does Birmingham (15.8%).
LaToya Harding
Pound holds steady after Sunak's snap election announcement
The pound was steady against the dollar on Thursday, holding near two-month highs, after Prime Minster Rishi Sunak called a snap general election.
Sterling pushed just under 0.1% higher versus the US greenback to 1.2727, as a six-week election campaign begins before the 4 July. It also came after data on Wednesday showed inflation did not slow as much as expected in April.
Average polling data suggests that it is likely the Labour Party will win and form a government, achieving power for the first time since 2010.
According to Nomura, prospects of a Labour government "may spark historically low EUR/GBP volatility if they pursue deeper EU integration."
The currency was also steady versus the euro, which is worth a little over 85p, close to the pound’s strongest since February.
Gold prices accumulated losses in early Thursday trading, extending the negative momentum from the previous session, which saw them drop below the $2,400 level.
Ricardo Evangelista, senior analyst at ActivTrades, said:
“Traders reacted to the release of the latest FOMC minutes, which revealed that some Fed officials expressed concerns over persistent inflation and raised the possibility of hiking rates.”
“The impact of the news was immediate. Treasury yields increased, and the US dollar gained ground against other major currencies as expectations of a rate cut in September faded.”
“As a result, traders moved to price in November as the more likely timing for the first Fed rate cut, driving higher Treasury yields and a stronger dollar, which caused losses for the non-yielding precious metal.”
LaToya Harding
Nvidia up pre-market after beating Wall Street forecasts
Nvidia (NVDA) again shattered Wall Street forecasts in its long-awaited earnings report Wednesday, sending shares of the artificial intelligence darling towards a record high in pre-market trading.
The company reported adjusted earnings per share (EPS) of $6.12 (£4.81) on revenue of $26bn (£20.43bn), a jump of 461% and 262%, respectively, from a year ago.
Nvidia shares rose 6% to $1,007 (£791.29) in pre-market trade, peaking above the psychologically important $1,000 mark and adding about $140bn (£110bn) in stock market value.
In the current quarter, Nvidia expects revenue of $28bn (£22bn) plus or minus 2%. That’s better than the $26.6bn (£20.9bn) analysts had expected.
In an exclusive interview with Yahoo Finance, following the company's first-quarter earnings report, CEO Jensen Huang pushed back against concerns the company could face a demand lull as it shifts between its current and next generation of AI chips.
It also announced a 10-for-1 stock split and said it is increasing its quarterly cash dividend by 150% from $0.04 per share to $0.10 per share, equivalent to $0.01 on a post-split basis.
LaToya Harding
Beware the sugar rush of UK companies being bought out
Investors should be cautious of the recent increase in mergers and acquisitions (M&A) in the UK, according to Stuart Clark, portfolio manager at Quilter Investors.
Companies listed in the UK have seen an increase in takeover interest, with high profile names being floated as acquisition targets. Just in recent months we have had bids for high profile companies such as Anglo American, Darktrace and International Distribution Services, the owner of Royal Mail.
He said:
“M&A has certainly picked up, not confined just to the mid-cap space, and this can provide a comforting short-term boost to investors portfolio."
“However, M&A is a double-edged sword and may just bring about a sugar rush for investors, causing a lot of short-termism to creep in and not thinking about the bigger picture.
“It is certainly the case that the UK market overall looks cheaper than many international peers and also relative to its own history it does not look expensive.
"Naturally this will bring about companies that wish to either look for bargains and consolidate the competition, or buyout those smaller companies that are successfully growing and can help larger companies that wish to accelerate.”
LaToya Harding
Oil extends decline for fourth session
An active oil rig operating at sunrise or sunset. Resource extraction, oil crisis (Mik39)
Oil prices extended their losses again on Thursday, before later recovering, after closing at the lowest level in three months on Wednesday.
It comes amid signs that the US Federal Reserve may hold interest rates higher for longer, which could weigh on energy demand.
Brent Crude (BZ=F) fell for a fourth session toward $81 a barrel and West Texas Intermediate slid close to $77.
“Oil is overall in a bearish momentum,” said Gao Mingyu, Beijing-based chief energy analyst at SDIC Essence Futures Co. “The biggest focus is still whether voluntary production cuts will be prolonged at the OPEC+ meeting.”
OPEC is set to meet on 1 June 1 and is largely expected to extend its current output cuts.
LaToya Harding
UK company growth wanes
Growth in the UK private sector slowed this month to its weakest in six months.
According to the latest PMI survey, the reading came in at 52.8 in May, down from 54.1 the month before — a two-month low.
The flash UK Services PMI Business Activity Index was 52.9, down from 55.0, and a six month low.
However, manufacturing returned to growth (up to 52.7 from 49.4) while firms upped prices at the slowest rate in over three years. Any reading over 50-points shows growth.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said:
“The flash PMI survey data for May signalled a further expansion of UK business activity, suggesting the economy continues to recover from the mild recession seen late last year. The survey data are consistent with GDP rising by around 0.3% in the second quarter, with an encouraging revival of manufacturing accompanied by sustained, but slower, service sector growth.
"The survey also brings welcome news of a cooling in service sector inflation, which is needed to open the door for the Bank of England to start cutting interest rates. A temporary surge in wage-related cost growth seen in April is showing signs of fading in May."
💥Another UK economic data miss: services PMI comes in worse than any economist polled by Reuters expected.
Bad timing for Rishi Sunak, even if the index is still handily above the 50 growth threshold.
Private sector firms in the eurozone were their most confident in more than two years, a new report has shown.
According the HCOB Flash Eurozone, PMI hit 52.3 in May as business reported their strongest growth in a year, with faster increases in activity, new orders and employment.
Business confidence in the single-currency bloc hit its highest level in 27 months, with the European Central Bank (ECB) expected to begin cutting interest rates next month from their record highs of 4%.
Dr Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said:
"This looks as good as it could be. The PMI composite for May indicates growth for three months straight and that the eurozone’s economy is gathering further strength.
"Encouragingly, new orders are growing at a healthy rate while the companies’ confidence is reflected by a steady hiring pace.
"This time, there is also some good news for the European Central Bank (ECB) as the rates of inflation for input and output prices in the services sector has softened compared to the month before.
"This will be supportive for the apparent stance of the ECB to cut rates at the meeting on June 6."
LaToya Harding
National Grid announce £7bn capital raise
National grid energy network. Electricity pylons in UK countryside, rural landscape (Paul Maguire)
Utilities have taken a beating today as National Grid (NG.L) announced a £7bn capital raise to help fund investment.
This will be through a fully underwritten rights issue of 1.09 billion new shares. he rights issue is at 645 pence per share on the basis of seven new shares for every 24 existing shares, the company said, representing a discount of about 42% to Wednesday's closing price.
Shares in the company fell 9% with Severn Trent and United Utilities both down 5% in sympathy.
"On both sides of the Atlantic, governments and regulators are moving with increased urgency to attract the levels of investment required to meet their decarbonisation targets," CEO John Pettigrew said in a statement.
LaToya Harding
FSB: Labour election victory 'not in the bag’
The head of the Federation of Small Businesses (FSB), which represents more than 500,000 small enterprises and traders, said an election victory is "not in the bag" for either party.
It comes after UK prime minster Rishi Sunak called a snap general election for 4 July yesterday, while inflation in Britain hit 2.3% in April, down from 3.2%.
As Labour leads the Conservatives heavily in the polls, Martin McTague, FSB national chairman, said each party “needs to win the votes of these business owners” if they are to secure victory.
McTague told BBC Radio 4’s Today programme:
"We are seeing increasing confidence with our members but it is very hard to interpret whether that is because they have confidence in the Conservative Party’s management of the economy, or they are starting to feel confident about an incoming Labour government.
"We know it is not in the bag. Either party needs to win the votes of these business owners."
LaToya Harding
Nationwide profits fall
File photo dated 17/12/23 of a Nationwide Building Society sign in London, UK. Nationwide Building Society, Barclays and Lloyds Bank made the biggest gains through customers using the Current Account Switch Service (Cass) in the final quarter of 2023, industry figures indicate. Between October 1 and December 31, Nationwide made 163,363 net gains in terms of full account switches. Issue date: Thursday April 25, 2024. (Mike Egerton, PA Images)
Nationwide Building Society revealed a fall in pre-tax profits to £1.8bn for the year to 4 April on Thursday, down about a fifth from the £2.2bn reported the year before.
It also saw lower earnings over the past year but it handed out a record amount of cash to its members.
The lender said it handed out £344m to members in June last year, as well as it passing on interest rate rises to savers.
Chris Rhodes, Nationwide’s finance chief, said that the mortgage market was down about 27% over the latest year, with buy-to-let lending plunging nearly 50%.
He said:
“As we look forward, we do expect the market to gradually improve, both as affordability improves from falling interest rates, and with wage inflation running ahead of CPI inflation.
“But it is going to be gradual, and as we look at house price data it is going to be a bit lumpy.”
LaToya Harding
Asia and US stocks
Stocks in Asia mostly fell overnight as traders digested policymakers in major economies preferring to take a patient approach to cutting interest rates.
The Nikkei (^N225) rose 1.3% on the day in Japan, while the Hang Seng (^HSI) fell 1.7% in Hong Kong. The Shanghai Composite (000001.SS) was 1.3% down by the end of the session.
Geopolitical tensions were at the forefront of investors’ minds as China’s military started two days of “punishment” drills held in five areas around Taiwan just days after new President Lai Ching-te took office.
Across the pond on Wall Street, the S&P 500 (^GSPC) dropped 0.3% to 5,307.01, while the tech-rich Nasdaq Composite index (^IXIC) declined 0.2% to 16,801.54. The Dow Jones (^DJI) finished 0.5% lower at 39,671.04.
It came amid more hawkish-than-expected minutes of the Federal Reserve’s latest policy meeting, and higher than expected UK inflation.
Investors also digested an assessment of New Zealand’s inflation problems from the country’s central bank, reducing bets of the pace and scale of global rate cuts expected this year.
LaToya Harding
Coming up...
Good morning, welcome back to our live markets blog. Stay tuned to keep up-to-date with what's moving markets and happening across the global economy.
Here's what's on the agenda for today:
7am: Trading updates: Johnson Matthey, National Grid, Bloomsbury, Wizz Air, AJ Bell, Rolls-Royce
9am: Eurozone flash PMI survey for May
9.30am: UK flash PMI survey for May
12.30pm: Bank of England chief economist Huw Pill speaking at the Reykjavík Economic Conference
1.30pm: US new housing index for April
2:45pm: US PMI Manufacturing
3:00pm: US New Home Sales
Watch: What is a recession and how do we spot one?
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